Abitibi-Price to combine with Stone-Consolidated Merger will create No. 1 newsprint maker

February 15, 1997|By BLOOMBERG NEWS

TORONTO — *TC TORONTO -- Canada's Abitibi-Price Inc. and Stone-Consolidated Corp. said yesterday that they will combine in a stock swap valued at C$4.2 billion (US$3.2 billion), creating the world's largest maker of newsprint.

The resulting company, Abitibi-Consolidated Inc., will have annual sales of -C$4.9 billion and control about 8 percent of the global newsprint market.

Paper companies have been consolidating as they struggle to overcome sliding prices, too much capacity and a limited number of newsprint buyers.

"More capacity in fewer hands makes it easier to control inventories and to maintain price discipline in the market," said Mark Diverio, an analyst at UBS Securities Inc.

Control of the new company will be almost evenly split between Abitibi and Stone-Consolidated. Abitibi investors will get one common share in Abitibi-Consolidated for each of their shares, while Stone-Consolidated holders will get 1.0062 shares.

Ronald Oberlander, Abitibi's chairman and chief executive, will be the new chairman while James Doughan, president and chief executive of Stone-Consolidated, will be president and CEO. The number of directors will be evenly split.

Stone-Consolidated is 46 percent-owned by Chicago-based Stone Container Corp., which has agreed to the combination. It will own about 25 percent of the new company.

"We will create the premier Canadian-based company in the global forest products company," Oberlander said.

The merger, expected to be completed in the second quarter, should result in annual savings of about -C$100 million and add to earnings in the first 12 months, the companies said.

Shares in Abitibi-Price closed at C$22, down C15cents, and Stone-Consolidated rose $1.35 to $22.25.

The talks come as the industry tries to overcome falling prices and too much capacity. In December, Avenor Inc. bid C$3.07 billion for debt-ridden Repap Enterprises Inc. and Donohue Inc. acquired Quno Corp. for C$1.1 billion in March.

"This industry needed consolidation," said Benoit Laprade, an analyst at Levesque Beaubien Inc. "There are too many players."

At US$500 a metric ton, newsprint prices are at what analysts see as near the bottom of the current price cycle at a time when there's too much capacity. Newsprint prices peaked at US$750 in late 1995.

Toronto-based Abitibi-Price makes newsprint at 10 mills in North America, and is the world's third-largest producer, said UBS's Diverio.

Stone-Consolidated, based in Montreal, has sawmills and production plants in Canada, the United States and the United Kingdom. It is ranked the world's sixth-largest producer, Diverio said.

Pub Date: 2/15/97

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